Hey it’s Sasha Evdakov and welcome to backstageincome.com where I share with you how money is made behind the scenes in your business and also your life.
In this week’s episode, what I’d like to do is share with you some insight about the four income types or the four different ways to generate and make money in this world.
There are a lot of different perspectives of these four different income generating ways or money making ways.
Robert Kiyosaki (Author of Rich Dad, Poor Dad) actually has three different ways; he has linear income or job income, meaning if you go to work for one hour and you get paid $5 per hour, you’re going to make $5. Then he also has your portfolio income, such as investing in real estate and then passive income.
For example, if you invest in the stock market or you have a business that generates income passively without your time or money, then it continues to make money for your time and time again.
Those are three different ways of generating income and money.
But you can really classify some of the passive things as portfolio income, so meaning if you have real estate investments, then couldn’t that be also classified as passive income as well?
Well, it really depends, it depends on how you look at things and how really focused in you get on the specifics of the words and definitions.
My goal for you in this video is not to really hone in and focus on the exact specifics of the word, but just give you some ideas and concepts to think about which you can apply for your own life.
That way you can see that there are different areas and ways to generate income, to make money and that there are different levels that you can achieve and attain.
And when you know and understand that, that gives you the ability to take yourself further if you want to. That gives you the ability to expand your ways and income streams, so that way you have money coming in from different rivers and different areas, combining it into a nice big river or big flow.
If we start breaking these different types of income levels, we can break them into baskets. Such as earned income and unearned income.
Earned income would be something like a job or unearned income would be something like inheriting money.
Then you also have passive income versus leveraged incomes or investments.
Passive income would be something like writing a book, such as my Business Launch Pad book.
And investment income would be investing in a stock or company like Apple and then getting a return on your investment by just letting your money sit there.
It’s still somewhat passive because you’re not doing too much, you just take your money, put it into a company and allow it to appreciate in value, but you’re still gaining things from passive income. So you could still classify it as passive income.
Let’s look forward and look at all these different levels, and let me just break a few of them down and keep in mind there are sub-steps within each one of these and potentially derivatives or little legs that go off of these things as well.
You can continue to narrow focus and niche down and break things down further.
The first level as we go into looking at the first level of an income type, just as Robert Kiyosaki said, it is the Earned income, with your job or linear income.
If you’re working for a company and you’re getting paid $10 an hour and you work for 30 hours, that means you make $300.
And remember, there are only 168 hours in a week. So there’s only so much that you can do to make a large living from that earned income when you’re working in a linear fashion. When you’re exchanging your time for money, because it’s linear.
The more hours that you work, the more you’re going to get paid. Unfortunately, it’s not exponential, such as when you invest in a company or let’s say you write a book and you get 20 thousand sales in a day. It’s not going to work out that way.
With a job, the minute that you stop working, you do not earn any more money, because you’re exchanging your time for money.
That’s the nature of that kind of business or that income level.
Often times this is not the place you want to be. However, many people do settle into the job income level type, and there’s nothing wrong with that. It’s just to understand that there’s a higher level that you can go to.
There are definitely great benefits to having a job. You probably get some health care benefits, you have a community that you could potentially depend on, and you feel good about being a part of something bigger.
However, it’ll really keep you at a certain level and it won’t continue to rise in terms of your income level beyond a certain point.
Unless of course you become a CEO, but then again, you’re still exchanging a great deal of your time and energy for money or for that end result.
Product income is the next type of income that you can have in order to make money.
For example, we here have the Business Launch Pad Book and by creating this product, this can be classified as passive income, but really it’s product income.
I have a product that I made and created, and now with more distribution, the more sales that I get, the more income that I would generate.
Another form of product income could be a video course, and this is my “Build Your Business Brick By Brick Course”.
And this, again, for every sale that I generate, there’s no additional time and energy that I have to put in, for every sale I’m making a profit and creating more and more money by just generating more sales.
Music artists do the same exact thing, when they write one song, through distribution, the more distribution that they get, every song that’s downloaded, every song that’s played, they earn more money through their products. And that is their product, it’s by creating and generating more music.
Continuity or residual income
Continuity income or residual income is the next type of income that you can generate or make money with.
With continuity or residual income, it’s basically when you have one single sale and you’re constantly making money from that sale time and time again.
Here’s what happens. Take for example a magazine company, which sells a subscription just one time to one person, so now every single year, depending on the subscription rate, you might be paying $20 to that magazine company, and year after year you’re paying $20, $20 and $20 to continue to receive the subscription or access to the service, just like an internet service provider.
Nowadays there’s all kinds of continuity programs out there and residual programs. There’s even companies out there that sell tubes of toothpaste or gift baskets for men, that if you pay ten to twenty dollars every month, you get a gift basket of a tube of toothpaste, hair gel and a bunch of other products that specific to you, just so you don’t have to go out and purchase them, there are even continuity programs that I’ve seen for socks, underwear, and even shavers or razors.
All these things are popping up all over the place, where you can purchase and subscribe for a gift basket for $5 a month, $20 a month, $50 a month and depending on your subscription level your products and the things that you get are going to vary.
The beauty behind this, if you own that company that’s selling these gift baskets, is that the minute you sell that subscription to that one person one time, every single month you’re generating revenue, so if the gift baskets sell for $50 and your cost of goods is let’s say $20 or $30, maybe you get it through wholesale or at a discount, you’re constantly making ten to twenty dollars every single month from that person.
And that person might be with you for many months or even years to come in the future.
The fourth income type is leveraged income, and this is probably the highest income form that I believe to be available and leveraged income is just taking your money and making more money with that money.
Typically leveraged income relates to a system or a process, you can do this in business or you can do this in terms of taking your money, investing it into a company and then you’re making more and more money as that company grows.
You can think of stock investing as going into leveraged income, so if you take for example investing in a stock like apple and you go into the company back in 20 years ago, and you hold on to that company for many years, your stock appreciates over time and then you’re able to cash out, so you’re leveraging your money through appreciation and it’s passive.
Use other people’s resources
The other way that you can use leverage is by using leverage from other people’s time and energy resources.
Meaning you don’t see any of your resources like time or energy. Use someone else’s resources to create a system and process for a business.
As an example, if we did this in our business and right now we don’t do this because I’ve written every single book that I have.
But let’s just say for example, if I have the book writing process down, and we decided to get into let’s say the dog niche or training dogs and pets how to behave properly at the dinner table or just around the park, and I went out and hire a bunch of dogs experts and writers to write those books for me, and then we went out, created covers (99 Designs is a great tool for creating covers), we did the editing, we did the marketing and we had the process and system.
So no I’m not spending my own personal time writing books anymore, I’m spending my personal time training other people to write the books for me, to create the covers for me and do the marketing for me.
This is what’s leveraging, it’s I’m leveraging other people’s time and energy and resources to make more products because I already have a system that works.
Looking at this on a larger scale, we talked about Subway in one of my other videos.
And in this video, when we talked about subway, if you’re leveraging people’s time and energy, by doing this through a business, what you can do is create a franchise and then creating another franchise and every time you create a franchise, it doesn’t require your time and energy to work at subway.
Instead, you’re helping the community who wants a subway, who wants another franchise, you’re helping them get started, because you have a system, you have a process and you have a brand that other people recognize.
Once you help them get set up, now you’re earning income through the franchise fees, or through other means and resources.
This of course, setting up your own business and duplicating it like subway could also be classified as passive income, just like creating your products, books and even creating your own continuity programs like a magazine subscription.
Keep in mind that there’s a lot of other sub-steps and ways to generate income, but these are kind of the core, and as you start streaming out and branching out to other levels, there are all sorts of ways to generate income, you just have to find what works for you.
One thing to keep in mind is to remember that there’s only a certain amount of hours per week that you can work because there’s a lot of other things that you need to do, between eating, sleeping and just balancing your life out and having a nice time.
If you want to be wealthy in this world, if you want to have the time, freedom, if you want to have income coming in, where you’re not dependent on someone else, you need to leverage our income or make some passive income or income that’s generating from other streams and not just have a linear income.
Resources & Helpful Tools
[thirstylink linkid=”6331″ linktext=”” class=”afflink” title=”Rich Dad Poor Dad”]
[thirstylink linkid=”5545″ linktext=”” class=”afflink” title=”Business Launch Pad Book”]
[thirstylink linkid=”6003″ linktext=”” class=”afflink” title=”Build Your Business Brick by Brick”]
[thirstylink linkid=”5557″ linktext=”” class=”afflink” title=”99 Designs”]